Since 2012, the unfunded liabilities of Pennsylvania’s worst-funded municipal pension systems have increased by $1 billion, according to the state’s top auditor.
The increase in liabilities comes despite years of rising stock market values.
The state’s auditor general says he will “continue to beat this drum” until lawmakers come up with a way to make municipal pension systems more sustainable.
From the Associated Press:
A continued failure by state lawmakers to act is allowing a growing problem of municipal pension debt in Pennsylvania to get worse, state Auditor General Eugene DePasquale said Wednesday.
DePasquale renewed the warning he gave a year ago, saying that municipal pension debt in the billions of dollars is putting municipalities and retiree benefits on shaky ground.
DePasquale said that municipal governments with the weakest pension plans were underfunding them by $7.7 billion through 2012, an increase of $1 billion after DePasquale’s office analyzed two years of new data.
That increase took place during a time when the economy was growing and stock market values were rising, DePasquale noted. Historically, the pension plans of police and firefighters have been responsible for most of the debt.
Nearly 70 percent of that $7.7 billion debt, or $5.3 billion, belonged to Philadelphia, according to DePasquale’s office. Pittsburgh was second with $485 million. Among Pennsylvania’s cities, Scranton had the worst funding ratio at 23 percent.
DePasquale warned that, unless changes are made, rising pension debt that forces a municipality into bankruptcy could mean benefit reductions for retirees. Some municipalities will have to raise taxes or lay off police and firefighters, he said.
“Some of them may be forced to do both,” DePasquale said.
The majority of the state’s 1,200 municipal pension plans were funded at 90 percent or higher, according to the Auditor General’s office.
But some plans are so underfunded that they threaten to bankrupt the municipalities with their unfunded liabilities.
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